# Two-Part Tariff of Pumped Storage Power Plants for Wind Power Accommodation

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## Abstract

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## 1. Introduction

- Study the two-part tariff mechanism of pumped storage power plants considering the wind power accommodation scenario and realize the rationality and economy of pumped storage charging and discharging strategy by using the peak-valley price difference of wind power, so as to improve the competitiveness of pumped storage power plants to participate in electricity market transactions.
- Determine the capacity tariff in the two-part pumped storage tariff through the approved operating period tariff method based on the principles of reasonable compensation of costs and reasonable determination of revenues and taxation in accordance with the law.
- Considering the economic advantages of “pumped storage + clean energy”, a pumped storage and wind power joint optimization scheduling model is to be established based on the original pumped storage pricing method. The pumped storage power electricity tariff is set on the basis of compensating variable costs through the optimal operation strategy obtained.
- Analyze and illustrate the feasibility of pumped storage power plants to reduce fossil energy consumption in several scenarios.

## 2. Two-Part Tariff

#### 2.1. General Structure of the Two-Part Tariff System

#### 2.2. Influencing Factors of the Two-Part Tariff

#### 2.2.1. Influence of Different Operating Strategies

#### 2.2.2. Influence of Uncertainty of New Energy Output

#### 2.2.3. Influence of Seasonal Storage Changes in Pumped Storage Power Plants

## 3. Modeling of a Two-Part Tariff Setting Strategy for Pumped Storage Power Plants

#### 3.1. Methodology for Approving Capacity Tariffs

_{n}in the first year to year N − 1; at the end of year N, the annual net cash inflow includes income from the salvage sale of fixed assets.

_{om}is the annual operation and maintenance fee; A

_{r}is the annual loan repayment; T is the total annual tax payment; C

_{s}is the income from salvage sale of fixed assets; and ρ

_{cin}is the corporate income tax rate.

_{vat}is the value added tax (VAT) fee.

_{vat}is the VAT rate; ρ

_{sal}is the sales tax rate; T

_{sal}is the sales tax fee; and T

_{cin}is the corporate income tax fee.

_{c}(CNY/month/MW).

_{c}is the annual pumping cost; Q is the total annual power generation; V is the installed capacity. The annual pumping cost, total annual generation, and tax-inclusive annual electricity sales revenue are calculated in the following section, and the specific solution process is shown in Figure 1.

#### 3.2. Modeling the Strategy for Setting Electricity Tariffs

#### 3.2.1. Background

#### 3.2.2. Model

_{1}is the reduction in the generation cost of coal-fired units; F

_{2}is the wind abandonment penalty of the original generation system; F

_{3}is the start-up and shutdown cost of pumped storage units; F

_{4}is the incremental energy cost of pumped storage losses; and F

_{5}is the pumping cost of pumped storage plants.

_{start}is the start/stop cost of the pumped storage unit; and U

_{g,t}is the operating state of the gth pumped turbine at moment t.

#### 3.2.3. Constraints

_{1max}and V

_{2max}are the upper and lower reservoir capacity of the pumping station; V

_{1}and V

_{2}are the initial daily upper and lower reservoir capacity; ${E}_{nt}^{f}$ and ${E}_{nt}^{c}$ are the amount of water generated and pumped up to moment t.

_{w}is the average water consumption rate of hydropower units.

#### 3.2.4. Algorithm and Solving Process

_{1}= 200, and k

_{2}can be calculated according to Equations (33) and (34). Thus, the electricity tariff can be obtained during the power generation period.

_{5}is the daily pumping cost of the pumped storage plant; ${P}_{t}^{u}$ is the time-of-day electricity load of the electricity users; k

_{1}and k

_{2}are price demand factors; and ρ

_{t}is the time-of-day electricity tariff.

## 4. Case Study and Discussion

#### 4.1. Result Analysis

^{3}; the initial reservoir volume is 50% of the capacity limit; the average energy conversion efficiency is 75%; and the average water consumption rate of hydroelectric units is 4000 m

^{3}/MWh; the installed capacity of wind power is 1200 MW; the wind speed and power generation are measured by a domestic wind farm; the installed capacity of thermal power is 2000 MW; the time scale is set at 1 h; the wind power theoretical output and load forecasting power data etc., refer to the relevant research in the literature [28]. The NSGA-II algorithm is used to solve this multi-objective optimization problem, and the simulations are performed in Python 3.8 to obtain the results.

#### 4.2. Analysis of Two-Part Tariff

#### 4.2.1. Setting of the Scenarios

#### 4.2.2. Analysis of Unit Output

#### 4.2.3. Analysis of Cost and Tariff

#### 4.3. Sensitivity Analysis of Two-Part Tariff for Pumped Storage

#### 4.3.1. Impact of Installed Capacity of Pumped Storage Units on Two-Part Tariff

#### 4.3.2. Impact of Pumped Storage Plant Storage Capacity on Two-Part Tariff

^{3}, the cost of pumping water is the lowest, and the corresponding electricity tariff is also the lowest. Moreover, the unused part of the reservoir capacity is very large at this time, and the excess capacity is wasted. When it is reduced to 19.1 million m

^{3}, the pumping cost can still remain at 1,029,300, and the capacity-to-capacity ratio is 1:6.37 (MW/10,000 m

^{3}). The lowest pumping cost and the lowest electricity tariff component of the two-part tariff is achieved when the upper and lower initial storage capacity ratios are 1:1. Because their ability to cope with both pumping and generation is stronger when the upper and lower storage capacities are relatively close to each other, they can adapt to changes in a variety of load conditions. In contrast, when the capacity ceiling is small or the difference between the upper and lower initial reservoirs is large, a feasible pumping and generation strategy is not available because it cannot meet the customer load requirements.

## 5. Conclusions

- Pumped storage power plants combined with wind power plants to participate in the electricity market can increase the amount of wind power accommodation, reduce fossil energy consumption, and significantly improve the economy of the joint operation system.
- The electricity tariff of a pumped storage power plant is mainly determined by the pumping cost and the capacity electricity price is mainly determined by the capital investment and total generation capacity during the construction period. The electricity tariff and the capacity tariff are 560 CNY/MWh on average and 146.83 CNY/MWh, respectively, in the example.
- The electricity tariff of pumped storage power plants decreases as the installed capacity increases. The lowest electricity tariff is achieved when the appropriate reservoir capacity is selected, and the upper and lower initial reservoir capacity ratios are 1:1. The electricity tariff of a pumped storage power plant is lowest when the ratio of the capacity to the upper reservoir capacity is 1:6.37 (MW/million m
^{3}).

## Author Contributions

## Funding

## Institutional Review Board Statement

## Informed Consent Statement

## Data Availability Statement

## Conflicts of Interest

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Example Scenarios | Pumped Storage Units | Wind Turbine | Thermal Power Unit | Source of the Two-Part Tariff |
---|---|---|---|---|

1 | × | √ | √ (100%) | — |

2 | √ | × | √ (100%) | pumped storage |

3 | √ | √ | √ (100%) | pumped storage + wind energy |

4 | √ | √ | √ (80%) | pumped storage + wind energy |

Scenario | Daily Pumping Power/MWh | Daily Pumping Cost/×10^{4}CNY | Average Pumping Cost/CNY/MWh | Average Electricity Tariff/CNY/MWh | Average Capacity Tariff/CNY/MWh |
---|---|---|---|---|---|

1 | — | 118.62 | 632.64 | 645.29 | — |

2 | 2500 | 115.54 | 462.16 | 624.21 | 149.81 |

3 | 2500 | 102.93 | 411.72 | 559.94 | 146.83 |

4 | 2700 | 111.46 | 412.81 | 561.43 | 139.11 |

Installed Capacities | 200 | 250 | 300 | 400 |

Pumping Costs | 106.41 | 104.07 | 102.93 | 101.68 |

Storage Capacity Limit /×10^{4} m^{3} | 3000 | 2500 | 2000 | 1500 | 1000 | |
---|---|---|---|---|---|---|

Upper and Lower Storage Capacity Ratio | ||||||

4:1 | 105.86 | 107.39 | 109.75 | — | — | |

2:1 | 102.93 | 103.39 | 104.21 | 105.94 | 109.75 | |

1:1 | 102.93 | 102.93 | 102.93 | 103.60 | 105.86 | |

1:2 | 103.27 | 103.60 | 104.58 | 106.26 | 109.75 | |

1:4 | 105.86 | 107.39 | 109.75 | — | — |

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**MDPI and ACS Style**

Li, H.; Zheng, H.; Zhou, B.; Li, G.; Yang, B.; Hu, B.; Ma, M.
Two-Part Tariff of Pumped Storage Power Plants for Wind Power Accommodation. *Sustainability* **2022**, *14*, 5603.
https://doi.org/10.3390/su14095603

**AMA Style**

Li H, Zheng H, Zhou B, Li G, Yang B, Hu B, Ma M.
Two-Part Tariff of Pumped Storage Power Plants for Wind Power Accommodation. *Sustainability*. 2022; 14(9):5603.
https://doi.org/10.3390/su14095603

**Chicago/Turabian Style**

Li, Hua, Hongwei Zheng, Bowen Zhou, Guangdi Li, Bo Yang, Bo Hu, and Min Ma.
2022. "Two-Part Tariff of Pumped Storage Power Plants for Wind Power Accommodation" *Sustainability* 14, no. 9: 5603.
https://doi.org/10.3390/su14095603